Growing Interest in Daigou Brings Revenue and Controversy

on March 3 2014 | in Trends | by | with No Comments

Gucci, China, parallel imports, Daigou

Chinese consumers’ concerns about prices and insecurities with the quality of luxury products in China have led them to take overseas shopping to new levels with a growing interest in daigou.

An increasingly large group of daigou agents, or those who specialize in acquiring foreign goods for mainland Chinese consumers, are shaping the international marketplace. Between 2008 and 2012, the daigou market grew 19-fold when it reached Rmb48 billion (US$7.8 billion), according to the China e-Commerce Research Centre; the center also believes that the market exceeded this value in 2013, growing to Rmb74 billion (US$12 billion).

The Chinese media report that there are hundreds of thousands of people involved in daigou trade, and Alibaba’s Taobao, China’s largest Internet retailer, produces more than 240,000 virtual stores offering almost 15 million overseas items. A recent study by Bain also showed that approximately 60 percent of Chinese luxury consumers have used daigou at some point.

According to Mo Daiqing, an analyst at the research centre, high import tariffs on luxury goods are to blame for the recent surge. Imported luxury items carry a 17 percent value added tax, and some product categories, such as cosmetics, impose even higher tariffs.

“The same brands of milk powder, cosmetics and handbags are much cheaper in Hong Kong, the US, Japan and South Korea than in mainland China,” Ms. Mo said in an interview with the Financial Times.

A number of Chinese consumers also believe that product quality is generally better in other countries, as opposed to the “uneven reputation” of the mainland. Consumers’ growing buying power, recent food safety scandals in China, and the increasing strength of the renmibi have also driven demand overseas.

Some daigou agents operate only between mainland China and Hong Kong. However, expatriate Chinese in cities like Seoul, Tokyo, Paris, London, and New York are helping increasingly to drive the market and making a wider variety of international goods available to Chinese consumers.

Unsurprisingly, much of this trade is illegal. The number of “parallel traders,” or daigou agents who use their multi-entry visas to cross the border at Shenzhen numerous times a day to sell items not declared at customs, is on the rise, with over 20,000 operating between Hong Kong and the mainland and a thousand arrested last year.

“We once found a person who had crossed the border 26 times a day,” said Liu Lizhen, a Shenzhen customs official.

E-commerce lawyer Dong Yizhi clarified that daigou is legal if the agents pay the proper tariffs

“If they pay customs duties, the price disparities will be much smaller and they won’t make money,” Mr. Dong said.

image credit: simon q

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